2025 (7) TMI 630 - HC - VAT / Sales Tax

Maharashtra government orders banning convenience fees on online ticket booking declared unconstitutional for violating trade freedom rights

PVR Limited, FICCI-Multiplex Association of India, Dnyandas Damodar Chaphalkar, Big Tree Entertainment Private Limited, Rajesh Balpande Director of Petitioner No. 1 Versus The State of Maharashtra, The Revenue Commissioner, The Collector Mumbai Suburban District Mumbai, The Collector Mumbai City, State of Maharashtra Revenue & Forests Department, The Revenue Commissioner.

The Bombay HC declared Maharashtra G.O.s dated 4 April 2013 and 18 March 2014 unconstitutional insofar as they prohibited collection of convenience fees ... Constitutional validity of Government Orders (G.O.s) dated 4 April 2013 (clause 3(d)) and 18 March 2014 (clause (a)) issued by the State of Maharashtra - prohibition vide order on theatre owners and others to collect convenience fees on online ticket booking. Whether, under the ED Act, there is a power given to the authority issuing the impugned G.O.s to prohibit the collection of convenience fees on online booking? - HELD THAT:- On a reading of Sections 7 and 10 of the ED Act, there is no power conferred on the Respondents to issue G.O.s which prohibits collection of convenience fees by the theatre owners and/or others from the customers on the transaction of online booking of tickets. Section 4(2)(b) of the ED Act only deals with methods of collecting the entertainment duty but it does not empower the Respondents to issue a G.O. prohibiting collection of convenience fees. Section 2(b) which defines “payment of admission” is an inclusive definition and specifies various items which can be considered as payment of admission. For example, any payment made by way of sponsorship amount for a program which is organized only for invitees without selling tickets, in such a case sponsorship amount will be treated as payment of admission. Similarly, any payment for seats or other accommodation in a place of entertainment will be treated as payment of admission. All the instances specified in Section 2(b) only provides as to what should be “payment of admission” on which the rate of duty specified in Section 3 can be imposed. Section 2(b) does not empower the State to provide as to what should be collected and what should not be collected from the customer. What it provides is that the collection mentioned therein would be treated as “payment of admission” and the levy of duty under Section 3 would thereafter be on such payment of admission. Therefore, in our view, the Respondents cannot take the aid of Section 2(b) of the ED Act to confer upon themselves the power to issue G.O.s for prohibiting the collection of the convenience fees. Whether such G.O.s, which prohibit the collection of a convenience fee, are violative of Article 19(1)(g) of the Constitution? - HELD THAT:- The law is now well settled that any law which is made under clauses (2) to (6) of Article 19, to regulate the exercise of the right to the freedom guaranteed by Article 19(1) must be ‘a law’ having statutory force and not a mere executive or departmental instruction. Applying the said well settled principle to the facts of the present case, there is no doubt that the impugned G.O.s inasmuch as they prohibit the Petitioner from collecting the convenience fees does not have any statutory basis and, therefore, cannot form the foundation of any action aimed at denying fundamental right under Article 19(1)(g) - the impugned G.O.s, to the extent that they prohibit collection of convenience fees on the tickets booked online, violates Article 19(1)(g) of the Constitution of India, and therefore, the impugned G.O.s to the extent challenged herein is required to be quashed and set aside. Whether the impugned notification can be saved by invoking Article 162 of the Constitution of India? - HELD THAT:- The G.O.s issued by the Respondent without fulfilling the mandatory provisions of Article 162 of the Constitution cannot be categorised as a decision by a State and, therefore, it cannot be said that the State is empowered to issue the G.O.s prohibiting collection of convenience fee. The impugned G.O. transgressed the fundamental rights under Article (19)(1)(g) granted to the Petitioners by prohibiting theatre owners and others from collecting the convenience fees from their customers. Absent a Statutory regulation which regulates the right to conduct the business of the Petitioner, the imposition of such a restraint would infringe the legitimate rights of theatre owners. The impugned prohibition is directly contrary to Article 19(1)(g) of the Constitution of India. If business owners are not permitted to determine the various facets of their business (in accordance with law), economic activity would come to a grinding halt. The choice of whether to book the ticket online or purchase it at the theatre is left to the customers. Clause (a) of G.O. dated 18 March 2014 and clause 3(d) of G.O. dated 4 April 2013 is declared as unconstitutional to the extent it prohibits collection of convenience fees/service charges on online ticket booking. Petition allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court were:Whether the Government Orders (G.O.s) dated 4 April 2013 (clause 3(d)) and 18 March 2014 (clause (a)) issued by the State of Maharashtra, prohibiting collection of convenience fees/service charges on online cinema ticket bookings, are constitutionally valid.Whether the impugned G.O.s have any statutory backing under the Maharashtra Entertainment Duty Act, 1923 (ED Act), including whether the State Government had power under Sections 7, 10, 3(3)(e), or 4(2)(b) of the ED Act to issue such prohibitory orders.Whether the impugned G.O.s violate the fundamental right guaranteed under Article 19(1)(g) of the Constitution of India, which protects the right to carry on any occupation, trade or business.Whether the impugned G.O.s can be saved by invoking the executive power under Article 162 of the Constitution of India.Ancillary issues raised but not decided included challenges under Article 14 relating to discrimination and whether the G.O.s apply to online service providers who are not agents of cinema exhibitors.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of the G.O.s prohibiting collection of convenience fees under the Maharashtra Entertainment Duty Act, 1923Relevant legal framework and precedents: The Maharashtra Entertainment Duty Act, 1923 governs the levy and collection of entertainment duty on payments for admission to entertainment, including cinema exhibitions. Key provisions examined were Sections 2(b) (definition of 'payment for admission'), 3 (charging section), 4 (method of levy), 7 (power to make rules), 10 (delegation of powers), and specifically Section 3(3)(e) which prohibits collection of amounts in excess of the payment considered for calculating gross collection capacity or houseful tax capacity.Court's interpretation and reasoning: The Court analyzed the scope of the ED Act and found that the Act is primarily concerned with levy and collection of entertainment duty and does not confer any power to the State Government or its departments to regulate or prohibit the collection of convenience fees by theatre owners or agents. Section 7 empowers the State Government to make rules for securing payment of entertainment duty but does not authorize prohibition of convenience fees. Section 10 permits delegation of powers but only those conferred by the Act. Section 3(3)(e) prohibits collection of amounts exceeding the payment considered for duty calculation but does not authorize prohibition of convenience fees per se. Section 4(2)(b) relates to conditions for payment of entertainment duty and does not empower the State to prohibit convenience fees.Key evidence and findings: The impugned G.O.s did not specify any statutory source of power. The Court noted that the prohibition on convenience fees was not part of the ED Act or its rules. The amendment to Section 2(b) of the ED Act in December 2014, which included service charges for online ticket booking within the definition of 'payment for admission,' post-dated the impugned G.O.s and supported the view that prior to this amendment, no such prohibition was statutorily authorized.Application of law to facts: Since the impugned G.O.s sought to prohibit collection of convenience fees without any statutory backing, they were beyond the scope of the ED Act and thus invalid.Treatment of competing arguments: The Respondents argued that Section 3(3)(e) and Section 4(2)(b) of the ED Act empowered the issuance of the G.O.s. The Court rejected this, holding that these provisions do not authorize prohibition of convenience fees but only regulate entertainment duty collection. The Petitioners argued that no power existed under the ED Act or otherwise to issue such prohibitions, which the Court accepted.Conclusions: The Court concluded that the impugned G.O.s lack statutory authority under the ED Act and are therefore invalid to the extent they prohibit collection of convenience fees.Issue 2: Violation of Article 19(1)(g) of the Constitution of IndiaRelevant legal framework and precedents: Article 19(1)(g) guarantees the right to practice any profession or carry on any occupation, trade or business. Article 19(6) permits the State to impose reasonable restrictions in the interest of the general public by law. Precedents include the Supreme Court decision in State of Bihar v. Project Uchcha Vidya Sikshak Sangh and Indian School, Jodhpur v. State of Rajasthan, which emphasize that restrictions on business must be by law and reasonable.Court's interpretation and reasoning: The Court held that the impugned G.O.s interfere with the Petitioners' right to carry on legitimate business by prohibiting collection of convenience fees, which is a contractual consideration between private parties. Such interference requires a statutory basis and must be reasonable. The absence of any law or statute regulating convenience fees meant the G.O.s imposed unreasonable restrictions violating Article 19(1)(g). The Court also emphasized that the power to restrict business rights must be exercised through law, not executive orders or policy decisions.Key evidence and findings: The Court noted the absence of any statute regulating convenience fees before the December 2014 amendment. The Petitioners' business model was legitimate and not shown to be contrary to law or public interest. The convenience fee represented a charge for providing online booking technology, which is a legitimate business expense.Application of law to facts: Since the G.O.s were executive orders without statutory backing and imposed prohibitions on a legitimate business activity, they violated the fundamental right under Article 19(1)(g).Treatment of competing arguments: The Respondents contended that the G.O.s were issued under executive power and for public interest. The Court rejected this, holding that executive power under Article 162 cannot be invoked in the absence of enabling legislation and that public interest restrictions must be by law.Conclusions: The impugned G.O.s violate Article 19(1)(g) as they impose unreasonable restrictions on the Petitioners' right to carry on business without statutory authority.Issue 3: Whether the impugned G.O.s can be saved under Article 162 of the Constitution of IndiaRelevant legal framework and precedents: Article 162 vests executive power in the State Government over matters on which the State Legislature may legislate. However, executive power cannot override or substitute the need for statutory authority. The Supreme Court in State of Bihar and Indian School, Jodhpur cases has held that executive power cannot be used to impose restrictions on economic or commercial matters between private parties in the absence of enabling legislation.Court's interpretation and reasoning: The Court observed that Article 162 requires the existence of a law under which executive power can be exercised. Since no statute empowered the State to regulate or prohibit convenience fees, the impugned G.O.s could not be saved under Article 162. The Court relied on precedents holding that executive instructions or policy decisions cannot substitute for law in restricting fundamental rights or regulating contractual commercial transactions.Key evidence and findings: The absence of any price control legislation or statutory regulation of convenience fees was emphasized. The Court noted that the impugned G.O.s were executive orders without legislative backing.Application of law to facts: The impugned G.O.s could not be justified as valid exercises of executive power under Article 162 in the absence of enabling legislation.Treatment of competing arguments: The Respondents argued that executive power under Article 162 justified the G.O.s. The Court rejected this, relying on authoritative precedents and constitutional principles.Conclusions: The impugned G.O.s cannot be sustained under Article 162 of the Constitution.Ancillary Issues: The Petitioners raised additional contentions regarding discrimination under Article 14 and applicability of the G.O.s to online service providers who are not agents of cinema exhibitors. The Court did not decide these issues, leaving them open for future consideration.3. SIGNIFICANT HOLDINGS'The impugned Government Orders, to the extent that they prohibit the collection of convenience fees on tickets booked online, violate Article 19(1)(g) of the Constitution of India, and therefore, the impugned Government Orders to the extent challenged herein are required to be quashed and set aside.''On a reading of Sections 7 and 10 of the Maharashtra Entertainment Duty Act, 1923, there is no power conferred on the Respondents to issue Government Orders which prohibit collection of convenience fees by the theatre owners and/or others from the customers on the transaction of online booking of tickets.''Section 3(3)(e) only prohibits collection of an amount more than what was considered for calculating gross collection capacity or houseful tax capacity. It does not empower the Respondents to issue Government Orders to prohibit collection of convenience fees.''The power of the State Government to deal with matters during the pandemic situation or otherwise has already been delineated by Parliament as well as the State Legislature. The State Government cannot exercise executive power under Article 162 of the Constitution to denude the person offering service(s) or goods of his just claim to get fair compensation/cost from the recipient of such service(s) or goods, where the State has no direct causal relationship therewith.''Any restriction imposed on a legitimate business must be by a law enacted by a competent legislature and must be reasonable. In the absence of any such law prohibiting collection of convenience fees, issuing impugned Government Orders cannot be saved by provisions of Article 19(6) of the Constitution.''The impugned Government Orders are executive orders without statutory basis and cannot regulate or prohibit the collection of convenience fees which are part of the contractual consideration between private parties.''The choice of whether to book the ticket online or purchase it at the theatre is left to the customers. If the customer feels it convenient to book the tickets online by not going to the theatre and paying the convenience fees, the Respondents cannot restrain the Petitioners from collecting the convenience fees since for providing this facility of online booking, the theatre owners have to invest in the technology.'Final determinations:The impugned clauses 3(d) of the G.O. dated 4 April 2013 and clause (a) of the G.O. dated 18 March 2014 are unconstitutional to the extent they prohibit collection of convenience fees/service charges on online ticket booking and are quashed and set aside.The impugned G.O.s lack statutory authority under the Maharashtra Entertainment Duty Act, 1923.The impugned G.O.s violate the fundamental right under Article 19(1)(g) of the Constitution of India.The impugned G.O.s cannot be saved under Article 162 of the Constitution of India.Issues relating to discrimination under Article 14 and applicability to online service providers are left open for future adjudication.